Section 115V of the Income Tax Act, 1961: Definitions for Tonnage Tax
Section 115V defined important expressions used in Chapter XII-G, the special tonnage tax framework for shipping companies. The definitions covered charter arrangements, qualifying companies and ships, tonnage income and related shipping activities.
Definitions under Section 115V
The following is a plain-language explanation of each clause of section 115V as amended, rather than a substitute for the enacted statutory wording.
Clause (a): Bareboat charter
Hiring a ship or inland vessel for a stipulated period where the charterer has possession and control, including the right to appoint the master and crew.
Clause (b): Bareboat charter-cum-demise
A bareboat charter under which ownership of the ship or inland vessel is intended to pass to the chartering company after a specified period.
Clause (c): Director-General of Shipping
The Director-General of Shipping appointed by the Central Government under section 7(1) of the Merchant Shipping Act, 1958, as referenced in the provision.
Clause (d): Factory ship
Includes a vessel providing processing services for fishing produce.
Clause (e): Fishing vessel
Has the meaning assigned by section 3(12) of the Merchant Shipping Act, 1958, as referenced in the provision.
Clause (ea): Inland vessel
Has the meaning assigned under section 3(q) of the Inland Vessels Act, 2021; inserted with effect from 1 April 2026.
Clause (f): Pleasure craft
A ship or inland vessel primarily used for sport or recreation.
Clause (g): Qualifying company
A company satisfying section 115VC of the 1961 Act.
Clause (h): Qualifying ship
A ship or inland vessel satisfying section 115VD of the 1961 Act.
Clause (i): Seagoing ship
A ship certified as seagoing by the competent authority of any country.
Clause (j): Tonnage income
Income of a tonnage tax company calculated under Chapter XII-G.
Clause (k): Tonnage tax activities
Activities referred to in section 115V-I(2) and (5).
Clause (l): Tonnage tax company
A qualifying company for which an approved tonnage tax option is in force.
Clause (m): Tonnage tax scheme
The special scheme for computing business profits from operating qualifying ships under Chapter XII-G.
How the tonnage tax scheme works
Instead of determining qualifying shipping profits solely through ordinary business profit computation, the tonnage tax scheme determines deemed income with reference to prescribed tonnage-based rules. Eligibility, the election to enter the scheme, the scope of shipping income and the relevant computation provisions must be considered together. The definitions in section 115V did not independently grant eligibility or a tax exemption.
Changes under the Income-tax Act, 2025
Section 235 of the 2025 Act contains the interpretation provisions for the restructured tonnage tax framework. It includes definitions concerning inland vessels, qualifying companies, qualifying ships, tonnage tax activities and tonnage tax business. In particular, the qualifying-company and qualifying-ship criteria are set out directly within section 235, instead of merely cross-referring to sections 115VC and 115VD of the former Act. Readers should use the applicable statute for the relevant tax year and check the operative text and savings provisions.
Official statutory sources
For authoritative wording and amendments, consult the Income Tax Department's section 115V page, the 1961 Act as amended by the Finance Act, 2025, and the Finance Act, 2025 in the Gazette of India. For the successor statute, consult the Income Tax Department's official portal and the Income-tax Act, 2025, particularly section 235.
Historical note: Chapter XII-G and section 115V were inserted by the Finance (No. 2) Act, 2004, with effect from 1 April 2005. This article is explanatory and should be read with the law applicable to the relevant period.